Public Capital and its Contribution to the Productivity Performance of the Canadian Business Sector

This paper quantifies the contribution of public capital to productivity growth in the Canadian business sector. The approach developed here incorporates demand and supply forces, including the contribution of public capital, which may affect productivity performance. We estimate the model using disaggregated data composed of 37 industries in the Canadian business sector for the period 1961-2000. The results indicate that the main contributors to productivity growth, both at the industry and aggregate levels are technical change and exogenous demand (representing the effect of aggregate income and population growth). Public capital contributed for about 18% of the overall business sector multi-factor productivity growth over the 1961-2000 period. This is somewhat lower than the figures reported in the literature. However, the magnitudes of the contribution of public capital to productivity growth vary significantly across industries, with the largest impact occurring in transportation, trade and utilities.

[1]  Maria Teresa Ramirez.  On Infrastructure and Economic Growth , 1999 .

[2]  E. Gramlich,et al.  Infrastructure Investment: A Review Essay , 1994 .

[3]  Alicia Haydock Munnell,et al.  Why has productivity growth declined? Productivity and public investment , 1990 .

[4]  Paul Schreyer,et al.  The OECD Productivity Manual: A Guide to the Measurement of Industry-Level and Aggregate Productivity , 2001 .

[5]  Helmut Seitz,et al.  The economic benefits of public infrastructure , 1994 .

[6]  James Richmond,et al.  The role of public capital in production , 1992 .

[7]  Jonathan Ratner,et al.  Government capital and the production function for U.S. private output , 1983 .

[8]  Kevin T. Deno.  The Effect of Public Capital on U. S. Manufacturing Activity: 1970 to 1978 , 1988 .

[9]  J. Tatom,et al.  Public capital and private sector performance , 1991 .

[10]  Theofanis P. Mamuneas,et al.  The Effects of Public Infrastructure and R&D Capital on the Cost Structure and Performance of U.S. Manufacturing Industries , 1991 .

[11]  A. Shah,et al.  Dynamics of Public Infrastructure, Industrial Productivity and Profitability , 1992 .

[12]  Robert M. Schwab,et al.  PUBLIC CAPITAL FORMATION AND THE GROWTH OF REGIONAL MANUFACTURING INDUSTRIES , 1991, National Tax Journal.

[13]  Bengt Hansson,et al.  Measuring the Contribution of Public Infrastructure Capital in Sweden , 1991 .

[14]  J. Richmond,et al.  Public Capital and Long-Run Costs in U.K. Manufacturing , 1993 .

[15]  Catherine J. Morrison Paul,et al.  State Infrastructure and Productive Performance , 1992 .

[16]  Panicos O. Demetriades,et al.  Intertemporal Output and Employment Effects of Public Infrastructure Capital: Evidence from 12 OECD Economies , 2000 .

[17]  John G. Fernald,et al.  Roads to Prosperity?: Assessing the Link Between Public Capital and Productivity , 1997 .

[18]  Tarek M. Harchaoui,et al.  Public Infrastructure in Canada: Where Do We Stand? , 2003 .

[19]  David Alan Aschauer,et al.  IS PUBLIC EXPENDITURE PRODUCTIVE , 1989 .